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HHS Expands Medicaid Health Coverage Under New Rules

HHS published new rules in the Federal Register Monday that could allow "tens of thousands" of low-income Americans to enroll in Medicaid who are above the Medicaid eligibility income level and pay high medical bills. The new regulations will give states "greater flexibility" in determining Medicaid eligibility, which will help seniors, the disabled and families with disabled children to obtain Medicaid coverage and to be able to obtain such coverage for treatment at home rather than in institutional settings. "This new policy has important potential to open doors to community living for thousands of Americans who are able to live at home and do not want to be confined in nursing homes," HHS Secretary Donna Shalala said, adding, "It can enable people to obtain the services they need to live in their own home despite a chronic illness or disability, and can also help single parents making the transition from welfare to work." Prior to the new regulation, the "medically needy" criteria allowed states to offer Medicaid coverage to those who spent so much on medical bills that the income left over was low enough that the individual met the income levels linked to the now-defunct AFDC program (welfare), still used by many states to determine Medicaid eligibility. As a result, many with chronic illnesses could not work and retain Medicaid coverage.

In more than 40 states, beneficiaries had to remain in poverty in order for Medicaid to cover their high medical bills. The new regulations permit states to disregard (not count) certain sources of income when determining a low-income disabled Medicaid applicant's income level for purposes of Medicaid eligibility, creating additional flexibility for beneficiaries to participate in the workforce and to "still retain vital health coverage." In addition, the rule works to remove what many analysts call Medicaid's "institutional bias," which allowed individuals in an institutional setting to qualify for Medicaid at much higher income levels than if they lived at home. In addition, the policy change will permit states to offer health coverage to low-income youths attending school or "making the transition to jobs," and to parents "leaving welfare for work." For instance, a state may disregard income from a savings account to fund the purchase of a home or car. HHS estimated that the new regulations would cost both federal and state governments about $960 million over five years (HHS release, 1/8).

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